Mexico's Inflation Meets Forecasts, Paving Way for Rate Cuts

• Mexico's headline inflation landed in line with expectations in the first half of June, reinforcing analysts' expectations that the central bank should continue to steadily bring down interest rates in Latin America's second-largest economy.
• Mexican consumer prices rose 0.10% during the first half of June compared to the prior two weeks, data from the national statistics agency showed on Tuesday, in line with the 0.11% projected by economists in a Reuters poll.
• Inflation in the 12 months through mid-June meanwhile hit 4.51%, also in line with expectations, an increase compared with 4.22% the prior month but easing from the 4.62% registered in the second half of May.
• Analysts at Banamex said they expect inflation to "resume a downward trajectory in the coming months." A rebound in merchandise prices from low levels last year should continue "albeit at a slower pace, considering the stability of the exchange rate and the moderation in producer price inflation," it added.
• The increase moves the inflation figure further from the Bank of Mexico's target range of 3%, plus or minus 1 percentage point.
• The central bank cut its benchmark interest rate by 50 basis points in May - its third consecutive cut of that size - bringing it down to its lowest point since August 2022, at 8.5%.
• Analysts polled by Reuters expect the bank to announce another cut of 50 basis points later this week. Analysts at Mexican Financial Services group, Actinver, said they expect that the decision to split the board, and that future cuts will likely be just 25 basis points.

(Source: Reuters)